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Monday, September 30, 2013

Spain's public debt to approach 100 percent of GDP end-2014

By Andrés González
MADRID (Reuters) - Spain's debt will rise to almost 100 percent of
national output by the end of next year, the highest level in more than a
century, according to the 2014 budget proposal handed to Parliament on
Monday.
The ratio of debt-to-gross domestic product (GDP) will rise to 99.8
percent by the end of 2014 from 94.2 percent at the end of 2013. Debt
stood at 92.2 percent of GDP at end-June.
Spain's public debt has almost tripled since a decade-long property
bubble burst in 2008, sending the country into a five-year long economic
slump. It is expected to continue rising for at least another three
years.
That will keep adding to Spain's debt servicing costs at a time when
it is fighting to reduce one of the euro zone's highest public
deficits.
Treasury Minister Cristobal Montoro reiterated on Monday that new
austerity measures wouldn't be necessary in 2014 to meet fiscal targets
set by Brussels as the country is expected to return to growth by the
second half of this year.
"The budget for 2014 is an economic recovery budget. This budget
will help us return to growth and create jobs in our country," Treasury
Minister Cristobal Montoro said.
The budget is unlikely to face any challenge in Parliament where the ruling People's Party (PP) has an absolute majority.
The budget also said pensions would rise by 0.25 percent through
2014 after a reform of the system passed on Friday which aims to link
pension hikes to economic health, the number of pensioners and the state
of the social security system.
GROSS DEBT
The budget said the Treasury would need to issue 243.9 billion euros
(204 billion pounds) of gross debt next year after budgeting for gross
issuance of between 215 billion and 230 billion euros last year.
Most of the issued debt would be via bonds or T-bills, but according
to the budget document the government would consider issuing up to 7
billion euros in other instruments or currencies if other interesting
financing options arise.
"Despite a fall in financing costs this year, the increase in
circulating debt means the financial burden will rise again in 2014,"
the budget said.
Interest payments on public debt are forecast to rise to 36.6
billion euros next year, or 3.5 percent of GDP, according to the
budget's assumption of interest rate costs of 36.5 billion euros, or 3.4
percent of GDP.
The yield on Spain's benchmark 10-year bond stood at around 4.36
percent on Monday, according to Reuters data, compared to a record high
of over 7.6 percent in the summer of 2012 when jitters about a breakup
of the euro zone were at a peak.

NWN: Looks like a catastrophe for Spain. Until nations are in control of their own economic systems and away from the obscene international bankers, then misery will be heaped on misery. Nations should issue debt free money as a sovereign nations right, like we all used to do.